The CA royalty income to a trust is fully distributed to a beneficiary in OR. CA demands income tax on income generated in CA. Does OR also require income tax on the same money received by an OR resident? (Is the income taxed in each state?)

Answer: Robby - As an Oregon resident income from all sources is subject to Oregon income tax. California taxes nonresidents on California source income. The royalty income is considered California source income. Because you have mutually taxed income (income taxed by two or more states) you must claim the income on your Oregon income tax return.

Depending on your income you may have to file a California nonresident return. You are allowed a tax credit on your California return based on the Oregon net income tax you were required to pay to Oregon on the royalty income. You would fill out the California Schedule S, Other State Tax Credits. You would attach that to the Form 540NR, California Individual Income Tax Return for Nonresidents.

For additional information and forms please visit the Oregon Department of Revenue at www.oregon.gov/dor and the California Franchise Tax Board at www.ftb.ca.gov.